Suppose the City of Oolagah is considering building a new water treatment facility to better address nutrient pollution from agricultural runoff. The plant will cost the city $4 million and take one year to build, after which point it will generate $375,000 per year in health benefits over a 20 year time horizon. a)The city has a discount rate of 6%. Please neatly fill in the table below. Time Benefits Costs Net Benefits Present Value of Net Benefits 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 b)What is the Net Present Value of this proposed project? If efficiency was the only objective for making the decision and we have fully accounted for all costs and benefits would you recommend the project go ahead or not? c) Now suppose that the new plan would only generate health benefits for 17 years. What is the NPV of this proposed project? If efficiency was the only objective for making the decision and we have fully accounted for all costs and benefits would you recommend the project go ahead or not?

Suppose the City of Oolagah is considering building a new water treatment facility to better address nutrient pollution from agricultural runoff. The plant will cost the city $4 million and take one year to build, after which point it will generate $375,000 per year in health benefits over a 20 year time horizon. a)The city has a discount rate of 6%. Please neatly fill in the table below. Time Benefits Costs Net Benefits Present Value of Net Benefits 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 b)What is the Net Present Value of this proposed project? If efficiency was the only objective for making the decision and we have fully accounted for all costs and benefits would you recommend the project go ahead or not? c) Now suppose that the new plan would only generate health benefits for 17 years. What is the NPV of this proposed project? If efficiency was the only objective for making the decision and we have fully accounted for all costs and benefits would you recommend the project go ahead or not?

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter4: Economic Evaluation In Health Care

Section: Chapter Questions

Problem 5QAP

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